Do I Owe the Estate's Debts If I Inherited Outside Probate?

Your mother named you on her savings account and her life insurance, so both came to you without a court case. Then a letter arrives about her unpaid medical bills and credit cards, and you start to wonder whether the money is really yours.

Inheriting does not make you personally responsible for a parent's debts. But some of what you received may not be free and clear. Under RCW 11.18.200, the beneficiary of a nonprobate asset that the decedent's creditors could have reached during life takes that asset subject to the decedent's debts, and can be required to account to the estate's personal representative to the extent needed to pay them. Life insurance and retirement benefits follow different, more protective rules, and all of it runs on a clock.

What Does RCW 11.18.200 Actually Say?

A nonprobate asset is one that passes at death under a beneficiary designation, a survivorship feature, a trust, or a similar arrangement instead of under a will. RCW 11.18.200 says that, unless a statute expressly exempts it, the beneficiary of a nonprobate asset that was "subject to satisfaction of the decedent's general liabilities immediately before the decedent's death" takes the asset subject to liabilities, claims, estate taxes, and a fair share of the expenses of administration. The beneficiary is "liable to account to the personal representative to the extent necessary to satisfy" those items.

Two limits are built into that language. The first is the test itself: if a creditor could not have reached the asset while the person was alive, the statute does not expose it after death. The second is that the obligation is tied to the asset and to what is actually needed. RCW 11.18.200 does not make a child or sibling answerable for the decedent's bills in general. It makes the inherited asset available, through the personal representative, when the rest of the estate comes up short.

Which Inherited Assets Are Exposed?

The statute lists the common ones. A payable on death or trust bank account, and transfer on death securities, are taken subject to the decedent's debts to the extent of the decedent's beneficial ownership interest immediately before death. The same is true of property held in joint tenancy with right of survivorship, which matters for joint accounts: the statute reaches only the decedent's own beneficial interest, not the surviving owner's share. Real estate received under a transfer on death deed is on the list. So is property in a revocable living trust the decedent created, and property passing under a community property agreement.

Spouses get no special pass. RCW 11.18.200 says that nonprobate assets that were community property immediately before death are subject to the decedent's liabilities and claims to the same extent as if they had been part of the probate estate.

Which Assets Are Protected?

For life insurance, RCW 11.18.200 defers to chapter 48.18 RCW. Under RCW 48.18.410, the lawful beneficiary of a life insurance policy payable to someone other than the insured is entitled to the proceeds as against the creditors and representatives of the insured. The statute carves out exceptions, such as premiums paid with intent to defraud creditors.

For pension and retirement benefits, the statute defers to chapter 6.15 RCW. RCW 6.15.020 exempts rights under an employee benefit plan from execution, attachment, and garnishment, with limited exceptions, and it defines that term broadly enough to include individual retirement accounts.

Secured debts are a separate matter. A lender with a mortgage or lien does not depend on any of this. Under RCW 11.40.135, the claims process does not affect a secured creditor's right to realize on its security. A house received by transfer on death deed arrives with its mortgage attached, a topic covered in who pays the mortgage on a house you inherit.

Who Can Come After the Asset, and in What Order?

The statute makes the beneficiary answerable to the personal representative, the person a court appoints to administer the estate. Before demanding anything, the personal representative must give the beneficiary notice, in the manner provided in chapter 11.96A RCW, that the beneficiary is liable to account under RCW 11.18.200.

Nonprobate assets are also not first in line. RCW 11.18.200 says they abate together with the probate assets under chapter 11.10 RCW. RCW 11.10.040 treats an identifiable asset that passes at death, such as a joint tenancy or a payable on death account, as a specific gift, and RCW 11.10.010 puts specific gifts last, behind property passing without a will, residuary gifts, and general gifts. In practice the residue of the probate estate is generally used before a payable on death account is. The general order of payment is explained in how debts are paid in probate.

How Long Am I Exposed?

The creditor deadlines in RCW 11.40.051 apply to both probate and nonprobate assets. If a personal representative publishes notice to creditors, most creditors have four months from the first publication to present a claim, or thirty days after being mailed or served actual notice if that is later. A creditor who was reasonably ascertainable but never received actual notice has twenty-four months from the date of death. If no notice is ever given, every creditor has twenty-four months from the date of death, unless the ordinary statute of limitations on the debt runs out first. The mechanics are covered in can creditors make claims against the estate.

That twenty-four month tail is the reason beneficiaries sometimes choose to start the clock themselves. When nearly everything passed outside probate, the person who received it may be able to publish a nonprobate notice to creditors under chapter 11.42 RCW.

A Worked Example

Rosa dies in Lynnwood owing $30,000 in credit card and medical bills. She leaves a $4,000 checking account in her own name, a $50,000 savings account payable on death to her son Daniel, and a $100,000 life insurance policy naming Daniel.

A personal representative is appointed and publishes notice, and the creditors file timely claims. The $4,000 probate account goes toward expenses and claims first, and it is not enough. The personal representative can then give Daniel notice and require him to account from the savings account for the shortfall, because Rosa's creditors could have reached that account while she was alive. The life insurance is Daniel's under RCW 48.18.410. Whatever is left of the savings account after the valid claims are paid is his as well. If creditors miss the deadlines in RCW 11.40.051, their claims are barred against the savings account too.

The practical lesson is timing. Because the duty is to account for the asset, spending it right away is not a defense anyone should count on.

Know What Is Yours Before You Spend It

RCW 11.18.200 matters most in an estate where the debts are large and the probate assets are small. If you received accounts, a home, or trust property outside probate and bills are arriving, the Law Office of Chad Foster can sort out which assets are exposed, which are protected, and when the exposure ends. Call 425.785.8679 to talk with a Snohomish County probate attorney.